Shandong Gold, Zijin, Zhaojin looking for overseas acquisitions
Chinese gold companies are adding assets as the precious metal rallies for a 12th year and as growth in gold production at home slows.
Posted: Monday , 05 Nov 2012
Shandong Gold Group Co., Zijin Mining Group Co. and Zhaojin Mining Industry Co., China's biggest gold companies, are looking for overseas acquisitions as bullion prices gain, company executives said.
"We aim to have at least one acquisition each year over the next three years," Li Zhongyi, chairman of the international mining unit at Shandong Gold, parent of China's second-biggest gold producer by value, said in an interview at a mining conference in Tianjin. "Mines worth $1 billion would fit our plan. We prefer mines which are already in production."
Chinese gold companies are adding assets as the precious metal rallies for a 12th year and as growth in gold production at home slows. The Bloomberg World Mining Index, a capitalization-weighted index of the world's 118 leading mining stocks, has dropped 14 percent the past 12 months amid a slowing global economy.
"Our development would be very limited if we don't expand overseas because China is lacking large gold mines," Chen Jinghe, chairman of Zijin Mining, China's biggest bullion producer by value, said in a separate interview, "Overseas assets should contribute one third of Zijin Mining's revenue and profits in three to five years," Chen said.
Zijin is targeting spending of as much as 10 billion yuan ($1.6 billion) annually on acquisitions and expanding mines, Chen said last year.
Zhaojin Mining, China's fourth-biggest gold producer, is studying acquisitions in South America and other regions, Chen He, assistant to the president of the company, said in an interview in Tianjin. The company may announce a deal "in the near future," he said without elaborating.
Deal Volume Slumps
Gold has risen 7.4 percent since the beginning of the year, heading for a 12th straight annual gain, the longest winning streak in at least nine decades. Takeovers and stake purchases in the gold mining industry total $8.05 billion so far this year, heading for the lowest level of activity since 2004, data compiled by Bloomberg shows.
Gold output in China, the world's biggest producer, climbed 5.9 percent to 361 metric tons last year, the China Gold Association said on its website. The nation's top 10 producers accounted for 184 tons, the association said. By comparison, Barrick Gold Corp., the world's biggest gold company, expects to produce as much as 233 tons this year.
China National Gold Group Corp., parent of China's third- biggest bullion producer by value, is in talks with Barrick for the possible purchase of a 74 percent stake in African Barrick Gold Plc., Toronto-based Barrick said Aug. 16.
Barrick Talks Continue
The talks are still underway, Wu Zhanming, China National Gold's spokesman on the project, said in a phone interview, without elaborating. Shandong Gold, Zijin and Zhaojin aren't in any acquisition talks with Barrick, the officials said.
Shandong Gold, which scrapped takeover talks with Concord, New Hampshire-based Jaguar Mining Inc. earlier this year, agreed to take a 51 percent stake in Perth-based Focus Minerals Ltd. to add production in Australia in a A$227.5 million ($235 million) deal, the target company said Sept. 20.
The transaction, which has received approval from the Australian government, is expected to get the nod from Chinese regulators this month, Li said.
Shandong Gold plans to sell shares in a unit comprised of acquired assets and list the unit in Hong Kong or Australia as part of its three-year plan, Li said. The company also plans to list its nonferrous metals sector in Hong Kong next year, he said.
Zijin has a similar plan, Chen said.
"Internationalization, securitization and large projects are what we are looking for," he said. "We plan to integrate our acquired assets for equity financing at an appropriate time."
The company has received 30 billion yuan in loans from the China Development Bank's Hong Kong and Fujian units for overseas acquisitions, Chen said.
"Money is not a problem," he said.
--Helen Yuan. Editors: Iain Wilson, Jason Rogers
To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at firstname.lastname@example.org
To contact the editor responsible for this story: Jason Rogers at email@example.com
©2012 Bloomberg News